Why sponsors take scandals in their stride

Australian sport's terrible start to 2013 has done amazingly little to turn off sponsors. With both companies and fans so invested, everyone seems willing to cop a few credibility kicks.

The scandals besetting Australian sport seem to have had little effect on its marketability as sponsors continue to line up for the right to plaster their logos across stadiums and uniforms around the country.

The Australian sporting market is as lucrative as ever, with a majority of sponsorship deals continuing to thrive despite alleged links to organised crime and drug use within the industry.

Less than a week after the Australian Crime Commission released details of its investigation into multiple sporting codes, AFL major sponsor Carlton Draught released its "Footy’s back” advertising campaign.

The glamour of association with professional sport combined with the huge brand exposure it creates has made sponsorship one of the most popular and powerful marketing tools available to companies.

However, this has meant sport’s share of marketing budgets has grown to the point where the dividends to the sponsor are so large that they simply cannot afford to cut sponsorship deals without a very hard look at the repercussions.

Professor Hans Westerbeek, Dean of the College of Sports and Exercise Science at Victoria University, said with between 60 and 80 per cent of all sponsorship dollars spent on sport, the sporting market as a whole was too valuable for many companies to easily terminate deals.

The loyalty of many sports fans can also create problems for companies considering the future of sponsorships.

Sponsors hope that fan loyalty will rub off on their product or service, but that loyalty can carry a heavy price.

While customers often applaud businesses for cutting ties with controversial radio programs, such as Coles and 2Day FM after the hoax phone call, a similar approach to sports teams may result in a supporter backlash.

It’s a lot easier to switch radio stations than football teams – and supporters determined to stick by their side through thick and thin will often consider sponsors deserters if they aren’t willing to do the same.

"There’s a fair bit of research evidence that says that if you withdraw support, it will have the non-desired effect of fans blaming you for the downfall of the club rather than understanding that you [do so] because of the scandal that’s attached to it,” Westerbeek said.

"So the effect will be double negative – you will be associated with the negative event and you will be blamed for some of the effects it will have on the club that people follow.”

The relatively small size of the Australian sports market means there is intense competition for a limited number of sponsorship opportunities – essentially, if one company drops its association with a sports club, there will always be others clamouring to take its place.

"It’s very unlikely that the fans will drop the athletes or will drop the clubs,” Westerbeek said.

"Some [clubs] will be more likely to be damaged than others but in the end, after the dust has settled… there will be the same seasons, the same clubs, new athletes and new opportunities for sponsors to associate with.”

While NRL club Cronulla said the ACC report cost the club a major stadium sponsorship, other teams have secured partnerships despite recent controversies.

On February 1, Holden announced a multi-million dollar three-year deal with Collingwood, only two days after the club confirmed four players had reported illicit drug use to club doctors.

Similarly, despite the Australian Sports Anti-Doping Authority confirming an investigation into NRL teams including North Queensland Cowboys, the Queensland Country Credit Union extended its sponsorship of the club into a 12th year.

A measure which could ensure businesses continue to support sport while maintaining a level of brand protection is the incorporation of exit clauses into sponsorship deals.

The Transport Accident Commission recently enacted a "disrepute” clause in their contract with Big Bash League club Melbourne Stars, fining the club $10,000 after captain Shane Warne was convicted of speeding.

University of Melbourne senior lecturer Dr Lauren Rosewarne said the ACC’s report was unlikely to deter companies from sponsorship deals, provided codes took steps to protect their image.

"I think codes will respond to the ACC report by putting in place a variety of different measures to convey the appearance of tighter scrutiny,” Rosewarne said.

While sponsors were quick to cut ties with disgraced athletes Lance Armstrong and Tiger Woods, it is rare for entire teams or codes to lose deals – perhaps it is easier for fans to be judge, jury and executioner when only one culprit is involved – and they seem less likely to want to write off an entire team.

A notable exception was Melbourne Storm, who lost multiple sponsorships following revelations of salary cap breaches. But even they quickly found new backers.

Ultimately, perhaps, just as fans need their sports heroes to remain heroes, so do businesses.

No one – sponsor, fan or code – wants to see their team embroiled in scandal, which is why, in this case, some of the country’s largest sponsors seem happy to sit on the sidelines.

After all, it’s only pre-season.